The penny auction model is fundamentally a fraud because of two issues, "chat mafia" Vs. "Bots".

1. The penny auction model is not compatible with "social features" like chat. When chat is added to penny auctions, bidders start making bidding arrangements:(Ginny don't bid on iMac and I won´t outbid you on the iPhone) which would make the house lose money. This is generally known in the industry as the "chat mafia".

2. The only way for the auction house to compete with "chat mafia" is by adding hidden bots.(bots=scam)

The only way to eliminate both of the evils and to add social feature support is by adding a funding phase.

So that each item goes through 2 phases:(see attached screenshot)

1. Funding Phase 2. Bidding Phase

Once an item is 100% funded it is opened for bidding.

The only way to get bids is by funding items:$10 Get 10bids No Bonus $20 Get 21bids 5% Bonus $50 Get 55bids 10% Bonus $100 Get 115bids 15% Bonus

Bids can be used on any item that is already opened for bidding. The last bidder can purchase the item at the final price.

The penny auction model is fundamentally a fraud because of two issues, "chat mafia" Vs. "Bots".1. The penny auction model is not compatible with "social features" like chat. When chat is added to penny auctions, bidders start making bidding arrangements:(Ginny don't bid on iMac and I won´t outbid you on the iPhone) which would make the house lose money. This is generally known in the industry as the "chat mafia".2. The only way for the auction house to compete with "chat mafia" is by adding hidden bots.(bots=scam)The only way to eliminate both of the evils and to add social feature support is by adding a funding phase.So that each item goes through 2 phases:(see attached screenshot)1. Funding Phase2. Bidding PhaseOnce an item is 100% funded it is opened for bidding.The only way to get bids is by funding items:$10 Get 10bids No Bonus$20 Get 21bids 5% Bonus$50 Get 55bids 10% Bonus$100 Get 115bids 15% BonusBids can be used on any item that is already opened for bidding. The last bidder can purchase the item at the final price.

That's a popular misconception, I wouldn't say it's a fraud. Saying that is like saying poker is a fraud. You may not win every hand, but it doesn't mean the hands you lost were a fraud because they cost you more than you got back. There are data services out there that provide assistance to penny auction players, like allpennyauctions.com , where you can see site reviews and decide for yourself if an auction is a fraud.

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